Adenosine to Inosine (A-to-I) RNA editing is a site-specific modification of RNA transcripts, catalyzed by members of the ADAR (Adenosine Deaminase Acting on RNA) protein family. RNA editing occurs in human RNA in thousands of different sites. Some of the sites are located in protein-coding regions but the majority is found in non-coding regions, such as 3'UTRs, 5'UTRs and introns - mainly in Alu elements. While editing is found in all tissues, the highest levels of editing are found in the brain. It was shown that editing levels within protein-coding regions are increased during embryogenesis and after birth and that RNA editing is crucial for organism viability as well as for normal development. In this study we characterized the A-to-I RNA editing phenomenon during neuronal and spontaneous differentiation of human embryonic stem cells (hESCs). We identified high editing levels of Alu repetitive elements in hESCs and demonstrated a global decrease in editing levels of non-coding Alu sites when hESCs are differentiating, particularly into the neural lineage. Using RNA interference, we showed that the elevated editing levels of Alu elements in undifferentiated hESCs are highly dependent on ADAR1. DNA microarray analysis showed that ADAR1 knockdown has a global effect on gene expression in hESCs and leads to a significant increase in RNA expression levels of genes involved in differentiation and development processes, including neurogenesis. Taken together, we speculate that A-to-I editing of Alu sequences plays a role in the regulation of hESC early differentiation decisions.